Hollywood fever: Alibaba targets the movies
An investment in Taobao Movie is essentially a bet on how the company can leverage what Alibaba Pictures might become, as well as on the broader Chinese box office
When Alibaba Pictures acquired online movie ticketing platform Taobao Movie from its parent, Alibaba Group, last December, it paid RMB3.1 billion ($475 million) and got cinema ticketing systems supplier Yueke Software Engineering and movie crowdfunding platform Yulebao as part of the deal. Six months on, the business unit has raised RMB1.7 billion from financial and strategic investors at a valuation of RMB13.7 billion.
No explanation was given for the disparity. However, Taobao Movie, which was set up in 2014, now covers 5,000 cinemas responsible for 95% of China's total box office revenue ($6.8 billion last year, a 49% increase on 2014) and its daily ticket sales have ramped up from 30,000 to three million over the past 12 months. Furthermore, it has entered into a partnership with Damai, the country's largest entertainment ticket seller, which will enable Taobao Movie and Alipay users to buy tickets through Damai.
It is also worth noting that private investors are still willing to pay a premium for access to Chinese start-ups (it was officially a Series A round) that have established market positions and ties to the likes of Alibaba, Tencent Holdings and JD.com. CDH Investments' wealth management platform led this particular round alongside Ant Financial Services, another Alibaba affiliate, and Sina.com, with a string of movie industry players participating as well.
Then there is Alibaba Pictures' mission statement. "Through our M&A efforts, we are building an internet-powered integrated platform which spans financing and investment, entertainment content production, promotion and distribution, fan-based economics, and cinema service provision. Going forward, extending from the current platform, we also intend to develop more fan-based interactive functions and a business line for entertainment-related merchandise," the Hong Kong-listed company said in its 2015 annual report.
It is reminiscent of Alibaba Vice Chairman Joe Tsai's response last year, shortly after the company announced its intention to fully acquire online video platform Youku Tudou, when asked by an analyst for a snapshot of Alibaba's entertainment business three years hence. Users would engage with the company 24-7: viewing shorter, user-generated content on their mobile devices and computer screens; and consuming premium content in their big screen TVs.
As with Alibaba Pictures, the strategy allows the parent company to create more points of contact with users and gain a better understanding of consumption patterns. Alibaba can then thread this knowledge into its other businesses: advertisers can be sold better-targeted marketing solutions, informed by or perhaps aligned with entertainment content; and the company's e-commerce platforms can sell products that appear in this same content, even as viewers consume it.
Alibaba Pictures is not yet two years old and generated RMB263.7 million in revenue last year. Of this, RMB136.2 million came from internet-based promotion and distribution, which includes Taobao Movie, Yueke and Yulebao. Yueke accounted for all of the division's revenue, compared to RMB55.5 million for content production and RMB2.8 million for entertainment e-commerce.
An investment in Taobao Movie is therefore essentially a bet on how the company can leverage what Alibaba Pictures might become, as well as the broader Chinese box office. The ticketing business has already expanded into marketing and promotions, participating in distribution and ticketing tie-ups for 84 movies last year. Alibaba Pictures raised $1.5 billion in 2015 to support M&A and is developing its own pipeline of domestic movies and TV dramas as well as financing international projects.
Alibaba is not the only Chinese company active in this space. Last week Wanda Group announced plans to take its movie-making affiliate public through an RMB37.2 billion merger with movie chain operator Wanda Cinema Line. Towards the end of last year Wanda Cinema Line also made a substantial investment in online movie ticketing platform Mtime Holdings.
Alibaba and Wanda have different origins and operations, but they share a big screen ambition: to acquire entertainment content assets and monetize them through existing distribution channels.
More on Greater China
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.